SMARTSTONE PVT. LTD Vs. ECGC LTD

JUDGEMENT

(1.) The petitioners have assailed the repudiation of the claim for reimbursement made by the petitioners under an insurance policy. Learned Advocate appearing for the petitioner has submitted that, the first petitioner obtained a Shipment (Comprehensive Risk) Policy from the respondent no. 1. Such policy was valid for the period from November 30, 2008 till November 30, 2009 and covered various shipments made by the first petitioner during such period of time. The first petitioner exported granite slabs, to M/s. New York Stone LLC, New Jersey, comprised in 14 shipments between the period May 17, 2007 and April 3, 2009. 8 Shipments were insured with the respondent no. 1 for commercial risk. Such shipments were made upon obtaining credit limit approval from the respondent no. 1. There was delay in receiving payments from New York Stone LLC, New Jersey. Out of the total invoice value of Rs. 1,32,86,384 a sum of Rs. 4,67,199.27 remained due and payable by New York Stone LLC, New Jersey, to the first petitioner. The first petitioner also obtained order for supply of granite slabs from New York Stone-CT LLC, Connecticut. By a letter dated June 24, 2009, the first petitioner applied for credit limit approval for supply to New York Stone-CT LLC, Connecticut. The respondent no. 1 issued necessary credit limit approval for such supply on July 3, 2009. The first petitioner made 4 shipments to New York Stone-CT LLC, Connecticut for the period between July 15, 2009 and October 2, 2009. The first petitioner made appropriate declaration to such effect in the monthly shipment declaration form. The first petitioner also paid the necessary premium with regard thereto. New York Stone-CT LLC, Connecticut defaulted in making payment. The same was informed to the respondent no. 1. Consequently, the respondent no. 1 cancelled the limits with regard to New York Stone-CT LLC, Connecticut. New York Stone-CT LLC, Connecticut however made part payments. Despite best of efforts by the petitioners to realise the balance, they could not do so from New York Stone-CT LLC, Connecticut. Consequently, the petitioners lodged its claim with the respondent no. 1 on April 4, 2011. Diverse correspondence ensured between the parties with regard to the claim. By a writing dated July 7, 2001 the first respondent rejected the claim of the petitioners. The first respondent claimed that, New York Stone-CT LLC, Connecticut and New York Stone LLC, New Jersey were related through common principals. The petitioners made representations dated February 14, 2012 and subsequently on July 8, 2012 and August 30, 2012. By a writing dated February 5, 2013, the first respondent informed the petitioners that, the Apex Consumer Grievance Committee rejected the claim of the petitioners on the ground that, the two legal entities to which the petitioners supplied were related through common principals and that, the petitioner did not inform the first respondent that, payments were due from New York Stone LLC, New Jersey. A further representation was made by the petitioners. The same was rejected by the Independent Review Committee in its meeting held on March 21, 2014.

(2.) Learned Advocate appearing for the petitioners has submitted that, New York Stone LLC, New Jersey and New York Stone-CT LLC, Connecticut were two indifferent locations and two different legal entities. She has relied upon a certificate appearing in the affidavit dealing with the supplementary affidavit filed by the first respondent in support of such contentions. She has submitted that, the purported rejection is not in accordance with the terms of the insurance policy. Moreover, the first respondent has taken conflicting and contrary stand in the two purported letters of rejections. According to her, the first petitioner did inform the first respondent as to the delay in payment made by New York Stone LLC, New Jersey, within time. The application for insurance does not contain any format to give any information as to whether, New York Stone LLC, New Jersey and New York Stone-CT LLC, Connecticut are connected with each other or not. The first respondent was aware of the so-called connection between the two legal entities. The first respondent had issued the insurance coverage for the supply to New York Stone-CT LLC, Connecticut, despite such knowledge. It was not entitled to reject the claim for insurance on the ground of connection between the two legal entities. She has relied upon All India Reporter 1997 Supreme Court page 408 ( United India Insurance Co. Ltd. v. M/s. M.K.J. Corpn .) and submitted that, utmost good faith must be observed by the contracting parties in a policy for insurance. She has also relied upon 2016 Volume 4 Calcutta Law Times page 644 ( National Insurance Company Ltd. & Ors. v. Sujit Kumar Banerjee ) and submitted that, the petitioners did not waive their right to receive compensation. Relying upon 2004 Volume 3 Supreme Court Cases page 553 ( ABL International Ltd. & Anr. v. Export Credit Guarantee Corporation of India Ltd. & Ors .) learned Advocate appearing for the petitioners has submitted that, a writ petition is maintainable in respect of a contract for insurance. She has relied upon 2009 Volume 8 Supreme Court Cases page 316 ( Satwant Kaur Sandhu v. New India Assurance Company Limited ) in support of the proposition that, since the proposal form did not contain any clause requiring the petitioner to inform the insurance company as to whether the two entities are connected or not, the petitioner cannot be faulted for the alleged non-disclosure. She has relied upon 2017 SCC Online Cal. 1238 ( Life Insurance Corporation of India and Anr. v. The Insurance Ombudsman & Ors .) and submitted that, the non-disclosure of the so- called information is not fatal to the petitioner. Learned Senior Advocate appearing for the respondent has submitted that, there are various disputed questions of facts involved. A Writ Court should not intervene in such disputed matters. He has submitted that, the first petitioner ought to have disclosed the delay of New York Stone LLC, New Jersey in making payment of the shipments while, the first petitioner was obtaining the insurance coverage for the supplies to New York Stone-CT LLC, Connecticut. Not having done so, the petitioners are guilty of suppression of material facts. The petitioners did not act in utmost good faith in obtaining the contract for insurance. Therefore, the repudiation of the contract for insurance is valid. No interference is called for by the Writ Court. The writ petition is being heard after remand. Initially, the writ petition was allowed by the Single Bench on the basis of a concession given by the learned Advocate appearing for the insurance company. An appeal was carried therefrom by the insurance company which was dismissed, again on the basis of the concession given by the learned Advocate appearing for the insurance company. The special leave petition against such judgment and order of the appeal court was allowed by directing the learned Single Judge to hear and dispose of the writ petition on merits. ABL International Ltd. & Anr. (supra) has held that, a writ petition under Article 226 of the Constitution of India is maintainable even if disputed questions of facts are involved. A writ petition involving serious disputed questions of facts which require consideration of evidence which is not in record will not normally be entertained under Article 226 of the Constitution of India. A writ petition even if it raises disputed questions of facts, is maintainable and that, a writ court can decide disputed questions of facts. In such a scenario, it would be the incumbent duty of the writ petitioner to substantiate the allegations. The carriage of proceedings lies with the writ petitioner. It has to establish its case, with cogent evidence, in accordance with law. In the present case, a letter of rejection of the claim for insurance is under challenge. The parties are governed by the policy of insurance. The policy of insurance, contains various terms and conditions. The policy of insurance requires the first petitioner to make disclosure of facts. Disclosure of facts is a requirement under Clause 2 of the terms and conditions which is as follows:-

(3.) It appears from the materials made available on record, the first petitioner made four shipments to New York Stone LLC, New Jersey on February 15, 2009, February 15, 2009, March 27, 2009 and April 3, 2009. Payments against such shipments fell due on May 18, 2009, May 18, 2009, June 25, 2009 and July 3, 2009. The payments were not received by the first petitioner on the due dates. This fact was known to the petitioners. In terms of the policy of insurance and particularly the Disclosure of Facts clause, the petitioners were required and in fact obliged to disclosure the failure of New York Stone LLC, New Jersey to the first respondent immediately on the failures happening. The first petitioner applied for credit limit in respect of supplies to New York Stone-CT LLC, Connecticut, on June 29, 2009. Payments in respect of supplies to New York Stone LLC, New Jersey remained unpaid for at least three shipments with payments for 2 shipments falling due on May 18, 2009 and one shipment falling due on June 25, 2009. Therefore, on June 29, 2009, when the first petitioner was applying for credit limit in respect of supplies to New York Stone-CT LLC, Connecticut, payments were due from New York Stone LLC, New Jersey. This fact was not drawn to the notice of the first respondent when the first petitioner was applying for fresh credit limit. The same is in violation of Clause 2 of the terms and conditions of the policy of insurance.